Award Winning
commercial property solutions
Like most of the UK, the commercial property market continues to suffer from the effects of the recession and more fundamentally from the lack of finance from the four main high street banks. We seem to have weekly conversations with an increasing number of businesses that cannot secure funding from their bank for commercial property ventures or worse still, having facilities re-geared (to suit the bank) or removed completely. As predicted, Government has done little to addresses this issue - allowing home owners to increase the size of their home extension without planning isn't going to haul us out of recession!
So what is really going on ‘on the ground'?
We've spent over 25 years in the Northamptonshire commercial property market and in the recession of the early 90's, Wellingborough suffered a significant fall in commercial property values (like the rest of the Country) but the take-up of commercial property (sales and lettings) remained reasonably active, albeit at much reduced prices. The current recession has been born out of completely different circumstances - a banking crisis rather than high unemployment, high interest rates and high inflation - and of course we're not alone in our recession, with the rest of the world suffering to differing degrees.
Nevertheless, it is interesting to note that in the last six months, there has been a small but noticeable shift in enquiry levels in and around Wellingborough - both in terms of occupier requirements and more interestingly developer interest.
A combination of a gradual but fundamentally sound build up in business growth within certain sectors (not construction!) and a lack of supply of commercial properties - down to the pressures on the construction industry - has meant that we now have a very real ‘supply and demand' problem – demand outstripping supply. The effect of which has been the inevitable hardening of occupier incentives such as rent free periods, half rent periods, very short term leases etc. Although there has been very little general evidence of values increasing, we have seen prices/rents paid for specific buildings - those that really suit the occupier requirement - harden slightly, in effect, in the last six months, we've seen a small and fragmented increase in the value of deals done.
Wellingborough hasn't moved location in the last four years - it's still strategically located in the heart of the Midlands. It has an established commercial property market. It has a national and international regional and local occupier base, spread across a kaleidoscopic range of industries. We don't have one or two major employers in one or two industry sectors that leave us open to the dangers that face such limitations. Wellingborough has always had to fight its cause in attracting investment, whether it be attracting new occupiers to the area or funding from the investment market. But this is has helped Wellingborough harden its resolve and secure deals that wouldn't normally consider the location or have dismissed it in the past. The most recent being the opening of an M&S Simply Food Store at Castlefields.
And this scenario continues even in today's market, with the proposals for an M&S Superstore and mixed use development at Rushden Lakes, the ongoing negotiations with international leisure operators on the edge of Wellingborough Town Centre and the new negotiations with an international retailer in Wellingborough Town Centre.
None of these are done deals as yet. But the fact that the negotiations are happening at all in this market, surely speaks volumes for the location and the opportunities that exist for businesses to set up and expand in a market that is hungry for growth, but can still offer value for money and has a sound history of relative stability in values. Wellingborough never really saw the extremes of value experienced in other locations within England - there were highs and lows but the peaks and troughs were less dramatic than in many other locations.
So where does this leave us?
There is little prospect of the banks suddenly relaxing their approach to commercial property - for the majority, they don't really understand it - hence why they got themselves into this mess in the first place. For this reason, property transactions will be limited to cash transactions and private funding, which inevitably means limited to low risk or non speculative deals. New development will start to emerge over the next 12 months as a result of occupier demand and these deals will inevitably not be heavily discounted. They will be at a sustainable level for both the developer and the occupier. In other words, both sides will adopt a ‘grown up' view of each other's interests, something that is currently painfully absent in the banking industry!
So we have a very real chance of seeing some measured but cautious growth.
The irony of this is that the very sector that the banks will not currently invest in (the commercial property industry) will pave the way for the banking industry to gather confidence.
And then we can all get on our bikes and start the cycle all over again!
Further information or advice can be obtained from Prop-Search - Tel: 01933 223300 or its website: www.prop-search.com